I had never set up a foundation. Here’s how I did it.
I didn’t want to start a new non-profit foundation. Really.
I wanted to find an existing organization that I could work with that was doing educational work inside Tibet. I sure didn’t want to have to do all the paperwork, reinvent the wheel, and create “just another non-profit” in a sea of 501(c)(3) organizations in the USA. But, I couldn’t find any organizations actually supporting Tibetans through educational sponsorships inside Tibet. All of the organizations I came across in my research in the fall of 2017 worked with Tibetans living in other places – you know the list – like Nepal, Bhutan, India, Europe, the USA.
Well, that’s great – but the students Tsering Tso and I were trying to help lived inside Tibet. I was quite surprised (and yes, a tad bit naive). It’s hard to help Tibetans inside Tibet, for a lot of reasons that I won’t go into here. It’s impossible without Tibetan colleagues who live there. Well, I thought – ok. So we can still offer sponsorship opportunities, but do I really need a non-profit to do that?
But, do I really need a non-profit?
No, I don’t. But my American friends said it would sure be a lot easier to find education sponsors if they could donate through a legal 501(c)(3) entity that offered us the ability to get a tax deduction for our sponsorship donations. In 2016 and 2017, we did it through the generosity of our 3 sponsors with no tax deduction. I realized pretty quickly that was limiting to our people-to-people sponsorship approach. More of us well below the top income brackets can actually afford to sponsor a young person to go to college in China at $1000/year – and we really can use that tax deduction.
So, ok. I decided I had no choice, but to start my own non-profit. How hard can this really be? A ton of non-profits exist in the USA. Surely, its not rocket science.
I found out it’s not rocket science. Heck, it isn’t even basic economics class or first year law school. It’s quite easy.
Legal Zoom to [my] rescue.
I don’t like to reinvent wheels, so I headed over to Legal Zoom to see if they could do the heavy lifting for me at a reasonable price. They could. I used their “Business Formation” services for registering a Non-profit Company. I live in North Carolina, so it needed to be a North Carolina registered company. I chose their economy non-profit registration package, filled out their online information, paid the fee ($247.95 for Economy Non-Profit Corporation and EIN Obtainment) and waited for them to do their virtual paperwork magic. Well, it’s not magic, but it seemed most reasonable for me to delegate the entire process and return my focus back on running our marketing agency, Liquid Spark. It was pretty seamless for the most part. I applied in October 2017 and the company was successfully registered in February 2018. It would have been much faster, but I traveled a lot and didn’t get back to Legal Zoom as promptly as I should have that winter, when they had some questions on my application. Oops. ( I should probably not admit that, but this article is to help you figure out how to set up your own non-profit and not repeat any of my mistakes!)
Part 2 – Applying for tax-exempt status
Next up, applying for that magical (see a trend here?) 501(c)(3) tax-exempt status from the US government. Legal Zoom could help me here, too, this time for almost $500. Then, the actual application fee to the IRS was another $275.00 on top of that. I decided delegation had its limits and returned to my original question – how hard can this be, really?
Well, it turns out – not that hard.
When I got my packet from Legal Zoom with my Non-Profit Articles of Incorporation, I got a handy dandy folder with all the paperwork I needed plus a clear, cogent set of instructions on what to do next to file for tax-exempt status. I also got a very useful resource book by NOLO “How to Form a Nonprofit Corporation” that cut to the chase on what kind of 501 entity I should apply for, where to get the forms, and how to fill them out. Yep. It turned out to be a very simple Sunday afternoon task with a good latte for support. I filed online on April 29, 2018 and got my letter stating Liquid Spark Foundation received 501(c)(3) status on May 18, 2018.
Next up – Bylaws Creation and Annual Reports
The NOLO book does a very good job covering what I need to know and do next to keep the LSF tax-exempt status. We have a board of directors, no staff, and no executive director so its administratively as simple as it can be right now in start-up phase. I decided to have Liquid Spark (the sister for-profit marketing agency) underwrite all the expenses of the new foundation for the first three years. This included the fees associated with the registration and filing of LSF, all fees associated with wire transfers for annual college sponsorships to student accounts, administration of the foundation, website creation, etc. Our Liquid Spark team is quite excited about Liquid Spark Foundation and the possibilities to impact close to home and farther abroad.
Have more questions? Feel free to reach out to us – we’d love to encourage more of us to be the change we want to see in the world.
Useful Links:
Legal Zoom: How to Form A Non-Profit Business
NOLO How to form a non-profit corporation